The decision to allow unlocking and “jailbreaking” – the downloading of unauthorised applications – shatters Apple’s closed iPhone ecosystem in which the company decides what apps users may install and, in the US, offers its service only from AT&T.

The legalisation of jailbreaking was among several exemptions to the Digital Millennium Copyright Act (DMCA), a 1998 measure intended to protect intellectual property online.

Critics have argued that the law gave too much protection to companies and the exemptions announced on Monday were partly the result of lobbying from the Electronic Frontier Foundation, a free speech advocacy group.

“Consumers who want to unlock their phones are out from under the legal cloud that the DMCA imposed,” said Jennifer Granick, director of civil liberties for the EFF.

However, Ms Granick said the ruling would not oblige Apple to enable jailbreaking on the iPhone. “Nothing about this tells Apple that they have to build their phone in a particular way or that they have to allow jailbreaking.”

Any modification to the iPhone’s software will still void Apple’s warranty.

The DMCA is reviewed every three years as part of a process meant to ensure the law does not hinder the fair use of copyrighted materials. Monday’s changes did not single out Apple, but it is the obvious target of the new rules.

Apple began petitioning against the changes last year. “Jailbreaking constitutes copyright infringement,” the company said in comments to the Copyright Office. Other changes to the DMCA will affect film studios, publishers and video game makers.

●Citigroup warned on Monday that its iPhone app had improperly stored users’ passwords and other data on the devices, leaving them vulnerable to hacking.

The US bank said it had no reports that the data had been accessed or that money had been illicitly transferred but it urged consumers to immediately download an upgrade that corrects the problem.

The warning underscores the risks inherent in mobile online transactions. Some 80 per cent of banks offer mobile banking, serving 200m users, according to a June study by Juniper Research.